Photo by James Motter on Unsplash

The Fastest Way to Solve Tech’s Diversity Problem

ethanaustin
Apr 4, 2018 · 6 min read

As the world commemorates the tragic assassination of Dr. Martin Luther King, Jr., one of the best ways to acknowledge his legacy is to assess how well we’re living up to it. As I look out at the tech world it’s clear that we’re failing.

However, there’s a solution to our diversity problem, and if we coordinate as an industry we can actually fix it faster than anyone thinks.

Let’s start with the obvious. The statistics around women in tech are awful. The numbers are even worse for people of color. As an industry we should be embarrassed. But there is a solution that if we adopted today, would immediately change the face of tech.

If you’re thinking the answer is about pipeline, you’d be wrong. The pipeline problem has repeatedly been proven a myth. If you’re thinking it has to do with adding more more women and POC into the ranks of VC partner roles, you’d be closer but you’d still be off. Altering the face of VC is 1000% necessary for longterm change, but partner roles at VCs open up so infrequently that reaching gender and racial parity will be a slow process even at the most well intentioned firms.

The answer to how we can get more women and people with diverse backgrounds into tech is actually pretty straightforward:

We make an intentional decision to hire and retain more women and people with diverse backgrounds. Full stop.

This isn’t rocket science. It’s literally a problem we can solve today if we collectively decided to act with intention and adopt a common set of policies geared towards diversity and inclusion.

Of course, the more difficult problem to solve is how on earth could we ever round up all the tech CEOs and convince them to change their cultures overnight.

THE POWER OF THE PURSE

The answer to this question lies within the power of the purse.

The power of the what? If it’s been awhile since your high school civics class, here’s a mini refresher on how the power of the purse works.

When the federal government wants states to act in a certain way, it has the ability to withhold federal funds as a way to compel state action.

For instance, in 1984 congress wanted to reduce drunk driving deaths among teenagers. So it passed a law mandating that each state raise its minimum drinking age to twenty-one. States that didn’t comply were punished with a 10% reduction in their federal highway apportionment. While many states hated the law, every state wanted that ca$h money, and by 1995 all fifty states had complied.

The result?

An estimated 30,000 lives have been saved since the law went into effect and today there’s no real debate anymore about the proper minimum drinking age.

Twenty-one became the norm. Lives were saved.

The same tactic can and should be applied to solve the tech diversity problem. If the top twenty VCs got together and decided tomorrow to add a common diversity and inclusion clause into their term sheets, it would shift the cultural norms in the industry and we would see the gender and racial gaps start to disappear overnight.

Because VCs have the one thing startups cannot live without:

Allbirds.

No, just kidding, they got cash. And for startups cash is oxygen. Founders who want VC money would have no choice but to comply. Maybe some CEOs wouldn’t like it at first. But over time, it would just become the norm, the same way no founder today gives a second thought about a 10% option pool or any other once-novel-but-now-standard term being imposed on them.

THE TIPPING POINT

I tend to be pathologically optimistic about the future. And maybe that’s the case here, but I honestly don’t think we’re far away from the moment when the cultural zeitgeist on this issue tips once and for all. In fact, we’re already starting to see significant movement in this direction.

In 2016 Kapor Capital, a VC fund committed to diversity, mandated that all founders taking capital from the fund had to commit to upholding four pillars around diversity and inclusion within their companies.

That was a HUGE step forward, but it’s never the first person out on the dance floor that makes a party. It’s the second and third person out on the dance floor that signal to everyone else that the dance party has officially started. That’s when everyone else joins in.

In the past few months I think we may have had this moment when a number of top VC firms like Upfront Ventures and Lightspeed Venture Partners publicly announced that as part of their term sheets (or in Lightspeed’s case, a side letter) they’re now requiring that their portfolio companies adopt diversity and inclusion practices into their HR policies.

It’s hard to overstate what a big step forward this is.

In an industry that has traditionally been laissez faire around deferring to founders on how best to run their companies, VCs like Kapor, Upfront and Lightspeed are stepping in and saying “enough is enough.”

These pro diversity policies won’t just boost their LP returns (nearly all empirical data say diverse teams have better financial performance) they will forever change the lives of millions of people around the globe who work in tech. And that is something we should all be proud of.

The sooner other VCs join the Kapors, Upfronts and Lightspeeds of the world, the faster we change the norms for what is acceptable in the industry, and the faster we will close the diversity gap.

THE RIPPLE EFFECT

To me what’s even more exciting than the Lightspeeds and Upfronts taking a stand on this issue is seeing the ripple effect of their recent actions. Less than a week after Upfront’s public announcement, a founder asked me to review a term sheet he had just received from a well-regarded LA seed fund. It included the exact same diversity and inclusion clause that Upfront had made public just a few days before. I couldn’t help but get goosebumps.

This idea is catching on.

A wave is coming.

If ten or twenty VCs publicly committed to adding a D&I clause to their term sheets in the next month (Kapor Capital’s rider is top notch), the whole industry would follow. And perhaps in another fifty years from now, instead of feeling like we have failed to live up to MLK’s legacy, we’ll look back on this day and say “that was the day we decided to change history.”

TAKING ACTION:

  • If you agree with this post and want others to see it, please give it a clap
  • If you are an employee of a VC backed startup and you’d like to see more diversity in tech, ask your CEO what she’s planning to do about it or host a brown bag lunch with others at your company to discuss the issue.
  • If you are a pro-diversity founder or CEO of a VC backed startup check out #Movingforward to see where your investors stand and then have an open conversation with them about it. If they are not doing enough, ask them why not. Do the same with your tech founder friends.
  • If you are an investor and you agree that it’s time we solve this problem together, have a conversation with your partners and if you feel it’s the right time to go all in, here is a set of policy recommendations you can adopt. If you really want to move the needle, have the same conversation with like minded peers at other firms. Let’s get this going. We’re long overdue.

Startups and Burritos

Mainly about Startups. Sometimes about Burritos.

ethanaustin

Written by

Director @Techstars, LA. Previously Co-founder @GiveForward. Likes burritos. Dislikes injustice.

Startups and Burritos

Mainly about Startups. Sometimes about Burritos.

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